Find the Right Tenant for Your Property in Germany

Key takeaways

• You must know your customer persona before buying a property in Germany.
• Your property must fulfill the requirements of your customer (tenant) persona.
• Get precautionary insurance, like legal insurance, to cover the legal costs of disputes with the tenant.
• We have written a book on buying a house in Germany. It explains the complete buying process, how to invest in German real estate, and offers expert tips that’ll save your thousands of euros.

This is how you do it

• Pick a tenant persona that you want to cater to. We prefer young professionals as tenants over other types of tenants in Germany.
• Click good photographs of your property and create an ad on major real estate portals.
• Request all the necessary documents from the potential tenant. Conduct an interview and then decide.
• Take 3 months of cold rent as a security deposit.
• Finish the required paperwork, i.e, rental contract, handover protocol, etc.

Table of Contents

Investing in German real estate is lucrative. However, stable rental income determines the success of your real estate investment. 

Before we discuss how to find a good tenant, you must first know the different types of tenants in Germany. Identifying your customer persona (tenant) is critical, as this determines what kind of property you must buy and what to look for in a tenant.

Here are four types of tenants in Germany.

• Young professionals
• Families with children
• Students
• Seniors / Retirees

Let’s dive into each of the tenant personas.

#1 Tenant Type: Young working Professionals

What do we like about them?

• They usually have stable incomes and good credit scores
• They typically move out after 2-4 years due to a job or a bigger apartment as their income grows. Thus, you can rent the property again at the market price.
• Working professionals spend most of their time in the office, which means less time at home. Thus, less wear and tear. 
• Tenants with good income often complain less than tenants with limited income.
• Low risk of rent default.
• They are open to paying a premium for a well-maintained property at a good location. 

What should you consider?

• They have higher expectations for property features and amenities.
• Other landlords like you also prefer renting to working professionals. This means the working professionals have more options to choose from. Thus, your property should be better than other available properties. 
• Working professionals must commute to work daily, so it’s vital that the property has good public transport or parking.
• They prefer places that have gyms, restaurants, etc, nearby. 

What’s not crucial for this tenant group when renting a property?

• It doesn’t matter to them if a school or a Kita is nearby.
• As they don’t get sick so often, a hospital nearby is also not required.
• It doesn’t matter if the property is barrier-free.
• Young people are fine living on the third floor without a lift.

#2 Tenant Type: Families with Children

What do we like about them?

• If you want to rent your property and forget about it, renting to families is the best. Families tend to stay longer due to their children’s school or other priorities. 
• Treat your property with care and respect. They want to keep the home tidy for their kids.
• Often willing to pay a premium for properties in good school districts.
• Stable rent.

What should you consider?

• Expect more wear and tear on the property as children like to experiment with their surroundings. 
• Families prefer bigger apartments with a balcony and a garden.
• It’s vital for them that there are schools and kindergartens nearby.
• Kids fall sick more often than adults. Thus, a pediatrician nearby is vital.
• Public transport and safety are of utmost importance.
• If your property is not on the ground floor, an elevator is a must for a family with young children.
• Families prefer a quiet and safe neighbourhood.

What’s not crucial for this tenant group when renting a property?

• Don’t care if there are nearby entertainment places, such as clubs or bars.
• Families usually consider their kids when looking for a rental property. So, the kids-related amenities should be nearby. Other things don’t matter much. 

#3 Tenant Type: Students

What do we like about them?

• Student apartments are in high demand near university areas.
• Students are willing to pay higher per-room rates in university areas
• Predictable demand
• Parents often co-sign leases, providing additional security. We recommend getting a guarantee from the parents (Elternbürgschaft) when renting to a student.
• Students move out of the property after a few years. Thus, you can rent it again at the market price.

What should you consider?

• If finding new tenants feels like a hassle, students are not the best tenants for you. Students move out of the property more frequently due to internships, Erasmus programs, etc. This means you must find a new tenant quite often compared to others.
• More intensive property management is required.
• Usually, students keep the property tidy. However, you should expect more wear and tear.
• Students often sublet the property for a few months during summer break or while interning in another city. 
• Public transport nearby is a must for the students. A place to park their bikes safely is preferred. 
• Students prefer furnished apartments over empty ones. So, you must install a working kitchen and provide basic furniture, such as a bed, an almirah, a study table, and a chair. 
• If the furniture provided gets damaged, you usually have to get it fixed.
• Students like to party. So, clubs and other entertainment avenues nearby make the property more attractive.
• Converting your apartment into a shared living (WG) space is also a good business model. However, you should expect more effort in property management. Issues could arise, such as the tenants not getting along and complaining. 

What’s not crucial for this tenant group when renting a property?

• It doesn’t matter to them if a school or a Kita is nearby.
• As they don’t get sick so often, a hospital nearby is also not required.
• It doesn’t matter if the property is barrier-free.
• Students don’t mind living on the third floor without a lift.

#4 Tenant Type: Seniors/Retirees

What do we like about them?

• Retired individuals don’t like to change their apartments often. You can expect them to live at your place for a long time (5+ years). However, this also disadvantages you as you cannot revise the rent to the market price often.
• Generally quiet and cause minimal disturbances.
• Typically, maintain properties well.
• Often have stable, fixed incomes.

What should you consider?

• Property should be barrier-free and have a lift if not on the ground floor.
• You may need to modify the bathroom for easier access for elderly people.
• Fixed incomes limit the rent increase potential. 
• Elderly individuals enjoy even stronger tenancy laws.
• More responsive maintenance may be needed for health/safety issues.
• Property should be in a quiet neighborhood with easy access to healthcare facilities, shopping, and community centers. 

What’s not crucial for this tenant group when renting a property?

• It doesn’t matter to them if a school or a Kita is nearby.
• Don’t care if there are entertainment places, such as clubs or bars, nearby.

Now you understand differnt tenant personas. You should know which type of tenant you are targeting and buy a property that fulfills their requirements.

The next step is to learn how to find good tenants in Germany.

How do you find good tenants in Germany?

A good property in a good area attracts good tenants

Good properties attract good tenants. Don’t expect to find a good tenant if your property is unsuitable for the type you are looking for.

For example, if your property is in a neighborhood with many clubs and bars, this means many drunk people roam the streets at night. Families, elderly people, and even many young professionals don’t prefer to live in such a neighborhood.

Similarly, no one wants to live in a neighborhood with a high crime rate.

In short, the first step is to identify your customer persona and buy the property that fulfills their requirements. If you get this step wrong, finding the tenant of your choice will be very tough.

Steps to find the right tenant

• Take good pictures of your apartment. It’s best to click photographs in daylight. Watch a YouTube video to learn how to click professional photos of a room.
• Create an ad on ImmobilienScout and Immowelt.
• In the property ad, include as much information about the property as possible. Don’t include your exact address or phone number; you don’t want potential tenants calling you all day long.
• Describe the good things about your property, such as connectivity, nearby amenities, neighborhood, etc. When writing the ad, keep your target persona in mind. Remember, this is your sales pitch to attract the best tenant.
• Add the photographs of the interior and exterior of the apartment. Show the view from the apartment windows or balcony. Add the photograph of the apartment building. This helps tenants learn about your property and manage their expectations.
• If you bought the property in the correct location, you’ll receive several messages within 24 hours. Filter the tenants you find most suitable. We ignore tenants who don’t write anything about themselves. You can also overlook tenants who don’t have a premium profile (assuming you received many messages). 
• Depending on the number of responses, you can either deactivate your ad or post it again so that it shows at the top of the portals. 
• Once you have shortlisted up to 5 tenants, it’s time to invite the tenants for the property viewing and screen them.

Things to check before signing the rental contract

• Request and verify a SCHUFA report (German credit assessment). The Schufa should not contain a negative entry, ensuring the tenant has no past arrears.
• Obtain confirmation of no rent arrears from previous landlords (Mietschuldenfreiheitsbescheinigung) and a character certificate. Would you issue a good certificate for a tenant who gave you trouble in the past? Most probably no. So, asking for such a certificate reduces the probability of ending up with a problematic tenant. 
• Verify employment status (unlimited work contract) and income (typically, income should be at least three times the rent). 
• Request bank statements from the past three months or last year’s tax statement (Steuerbescheid) to verify income.
• Conduct a personal interview to assess compatibility. 
• Review their personal documents, such as their passports.
• Explain to them anything that’s important to you, such as whether pets are allowed, smoking is allowed inside the apartment, drilling is allowed, etc. This will help the tenant decide if this is the right home for them.
• Answer the tenant’s questions honestly. Once they start living in the property, they will find the truth anyway. So, it’s best to be transparent from the beginning.

Once you have found the tenant you want to rent the property to, the paperwork is next.

What paperwork is required when renting a property in Germany?

• You need a rental contract. You can create it for free here. Edit the rental contract to fit your needs.
• Ask the tenant to submit a copy of their documents, such as a personal identification document, past salary slips, Schufa score, personal liability insurance, letter from the previous landlord, etc.
•  As per German data protection law, you must store the documents in a safe place. You are not allowed to pass the tenant’s information to third parties, unless required by law.
• Ask the tenant to transfer the security deposit. Some tenants transfer the whole security deposit before moving in. Others transfer one-third before moving in, and the rest afterwards. 
• You must keep the security deposit separate from your personal assets. Almost every bank in Germany offers a “Mietkautionkonto.” They are usually free to open and have no monthly costs. You are legally required to keep the security deposit in a separate account. If you go bankrupt, the security deposit will not be considered in your assets. Moreover, the interest you earn on the rental deposit must be transferred to the tenant along with the deposit when they move out.
• Other documents you must provide to the tenant are
  • Wohnungsgeberbescheinigung
  • Create a thorough handover protocol. Keep one copy with you and give another to the tenant.
  • Copy of house rules and energy certificate. These are usually obtained when buying the property. You can also ask your Hausverwaltung about this.
  • If you are renting to an expat, they may ask you to fill out a form for their visa renewal.

You can download all the required documents here.